Goldman Sachs isn't what it was. We've pointed out a few times that JPMorgan appears to be a better location for traders right now. In today's Financial News, William Wright places Goldman in a 2nd tier of banks, including BarCap and Citi, that are merely, "muddling through." The new top tier, according to Wright, includes Deutsche and JPMorgan, which are, "weathering the storm," and seizing market share.
Is this true? Goldman would argue - and has argued - that it's merely relinquishing the market share gains it made in 2008/2009, which it always said were transitory, and that it's reducing risk in a challenging environment. However, its profits outside asset management were down 57% year-on-year in the first nine months, versus a decline of just 1.9% at JPMorgan's investment bank and 20% at Deutsche's corporate banking and securities business.
It remains to be seen whether this downturn in Goldman's fortunes will impact the calibre of the people who want to work for it. If so, Goldman's problems could turn secular.
So far, this doesn't appear to be the case. Last week, Lloyd Blankfein said 300,000 people applied to work at Goldman Sachs in 2010 and 2011 and the bank hired less than 4% of them. This doesn't look great compared to figures suggesting there are around 74 graduate applications per investment banking place across all banks in the UK, although it should be remembered that applications aren't the same as applicants and each individual applies multiple times.
Once it's got people through the door, Goldman still does a good job of keeping the ones it wants. Average tenure has increased to 5.5 years. On Friday, the bank announced 261 new managing directors (down substantially from the 321 it promoted last year). Their average tenure is expected to be 12 years.
Given the continued deluge of applicants, how can people differentiate themselves in applications to both Goldman and other banks? Megan Mcardle of the Atlantic points to a study that came out earlier this year suggesting that 'elite employers' look for 'valid markers' of a candidate's worth. These include attendance of elite schools and participation in sports that, "resonate with white, upper-middle-class culture."
Mcardle says banks like Goldman can't help themselves from hiring people with these elite markers and that such performance proxies are necessary because hiring decision makers never have any time: "They're not necessarily doing it on purpose. It's just a convenient shorthand for a group of people who are really busy."